Traditionally the UK food market was dominated by the ‘big four’ – Tesco, Sainsbury’s, Asda and Morrisons. They were other players – such as Co-Op, Waitrose and smaller, regional supermarket chains – but by and large the ‘big four’ were unchallenged.
Then the discounters, Aldi and Lidl, arrived, inexorably eating into the market share of the suddenly not-so-big four. Aldi and Lidl quickly topped the rankings for ‘most popular British brands’, comfortably beating ‘traditional’ names like Marks and Spencer and John Lewis.
But now it appears that they are all under threat from a new entrant to the market – one we have all heard of, and that’s already had a huge impact on British shopping habits.
Amazon has announced detailed plans to enter the UK supermarket sector. Two hundred and sixty supermarkets owned and run by Amazon are to be opened before the end of 2024, as it meets retailers like Tesco and Sainsbury’s head-on. Amazon has already poached one of Tesco’s former top executives to run its physical stores, all of which will apparently be ‘cashierless’.
Amazon already has six ‘Fresh’ grocery stores in the UK, offering customers a different way of shopping. Customers scan a code as they enter the shop – and then simply put items in their bags. Cameras and sensors detect what they have picked up off the shelves – and the customers then just walk out with their goods. The bill follows, sent directly to their Amazon accounts.
Retail analysts have described Amazon’s move as ‘typically bold and aggressive’. Research recently quoted in City AM suggested that Amazon is on course to overtake Tesco as the UK’s largest retailer within the next four years, with sales expected to reach more than £77bn by 2025. Last year Amazon’s sales were £36.3bn – well below Tesco at £64bn. Analysts are expecting 3.5% annual sales growth from Tesco, taking their sales to £76.1bn – not enough to stay ahead of Amazon. Sainsbury’s is expected to hang on to third place, with sales projected to grow by 4.5% and reach £42.2bn by 2025.
You will no doubt have your own thoughts on whether this move from Amazon is a good thing or a bad thing. Is the company responsible for the decline of our high streets? Or is this the fault of business rates? Does the blame lie more directly with the retailers? As usual the real answer is a combination of factors: what is undeniable is that Amazon’s entry into the supermarket sector – combined with Lidl’s plans to ramp up UK store openings – will lead to big changes in the way we shop and the retail landscape.
One thing is certain. Customers will find the idea of packing items directly into their bags and then simply walking out of the store very attractive. After all, we all know the struggle to keep up that feel-good feeling when standing in an impossibly long queue at the checkout…